Police officer: My budget and planning for the future

My name is Jamie Carganilla. I'm a Los Angeles Police Department officer, and I make just under $93,000 a year. I feel very secure and money means stability to me. It means being able to provide for my family. I have a young daughter, so knowing that I will be able to pay for everything that needs paying is a really good feeling. Prior to being a police officer, I was a waitress making minimum wage, scrounging for tips, so I'm very fortunate to have this job. I went to NYU, which is a notoriously expensive school. However, I used money that I earned in my childhood. I was an actress, so my mother, thankfully, saved all of that for me so I was able to use that, so I'm very happy that I don't have any student loans and I'm now saving for my daughter so she can pay for her school. The City of LA offers something called the Deferred Compensation Plan, which is a really wonderful tool in order to save for retirement. You have two options, just like an IRA or 401K. You can save traditional or ROTH. I chose ROTH because it makes more sense for my family. I'm relatively young so it makes more sense for me to pay the taxes now and then take it all when I'm ready, and what you can do with deferred comp is you can take a portion of that as a loan, up to 50% of the balance that you have, so I have $30,000 in there right now, so I could conceivably take up to $15,000 out and pay myself back over time with interest. You pay five percent interest on top of the loan payment. For this house that we bought, it had pink carpet so we needed to put wood floors in there, so we ripped that carpet out. I took $6,000 loan out of my deferred comp and then I pay back $55 per paycheck for a period of, I think it's five years, until it's paid off. Living in Los Angeles is not cheap. It is one of the most expensive cities. It's comparable to New York. I know rent is increasing every month. I think for a one bedroom apartment, I heard on the radio the other day, it's almost $2,300, which is just insane to me, so. Los Angeles is notoriously expensive. So annually I make just under $93,000 a year, which translates to about $7,700 a month, and then of course you have taxes and payroll deductions, my $55 wood floor loan is factored into that, so with the deductions that's $2,600 of deductions out of my paycheck. And then I have $500 in my savings that goes to my deferred comp every month, and my take home pay, that leaves me with about $4,600. Monthly expenses. So my mortgage is $2,400. For gas and electric, it's about $100. That fluctuates, obviously, every month. My TV, internet, and phone is bundled together for a total of $300 a month. My car payment is $350 a month. I pay $100 in insurance and about $100 in gas. I don't really have any loans. I have some credit cards that I do pay also, about $100 a month, and then I spend $600 in groceries. I have a $90 water bill, which I'm trying to get down, and about $200 in discretionary savings that I can buy whatever I need to buy, clothes for my daughter or makeup or whatever it is. My financial goals, number one is to save for retirement. I see a lot of people getting into their retirement years who have hardly anything, and I don't want that to be me. I want to be able to retire from the city, to have my pension, thank goodness that I'll have that. That's another huge perk. And then I want to be able to travel the world. I want to be able to enjoy my life after retirement. I don't want to be confined just to my house and the neighborhood, so I have a lot of aspirations, and that requires money, so I am trying to save as much as I can as early as I can to give it time to compound and grow. Another goal is to save for my daughter's future. I want her to be able to have opportunities to go to whatever school she wants to go to, so I try to make sure to monitor her accounts and to deposit as much as I can in her accounts. Also to be careful with credit cards. It's very easy to just use it and say I'll pay it later so I try to be very careful with how I use my credit cards and then which credit cards I pay. I try to pay off the one with the highest interest rate first, even if it's a smaller balance, so those are the main things that I try to focus on. I am saving for the future. I'm saving $500 a month in my retirement account, and I do have an emergency fund. Right now it's about $3,000. It needs to be more. I need to have about eight months of an emergency fund if catastrophe strikes and I lose my job or something, but we're working on it little by little. Since starting my time as a police officer, which has been six years now, I have learned that it's fascinating how when you make more money you spend more money. When I started my time here as a recruit officer, I was making about $1,300 per paycheck, $2,600 a month. Now I'm making double that, so what I've been trying to do is withdraw several hundred dollars in cash, keep it in my wallet, and pay for things with cash because it's very hard to part with that $20 bill in your hands when it's in your hand. You want to keep it there. But if it's a piece of plastic, it's very easy to swipe. so easy to scan the barcode. Oh what's eight dollars for a breakfast sandwich and a coffee? So that's why I'm trying to really monitor, using cash, how much I spend. That's the main thing that I'm doing right now, and just to really be more responsible with my budget and looking at how much I spend because a lot of times I don't want to know how much I spend at a restaurant because I know it's going to be a lot, but you have to look. You have to know about your money because when you know where your money is going and how you're using your money, that's when you have the power. If you don't, the money has power over you. I wish that I knew more about saving for retirement when I started. They really don't teach you that in school unless you're an economy major or something like a finance major. They don't teach you how to balance a checkbook. They don't teach you what interest does, and if they do, it's very cursory or very quick, so I wish that I had known that time equals wealth because I was 27 when I started and I only started putting $25 in my deferred comp. I could have easily done more. I didn't have a mortgage, I didn't have a car payment, but I thought oh, I guess $25 is good, and had I started with $100, I probably would have had $9,000 more than I do right now just because of how time and compound interest works. So I'm trying to rectify that now, but it's a lot harder to play catch up than it is just to start early, so I try to tell, you know, my young cousins that you know you're 20 years old. Just start now because by the time you're 50, you could easily be a millionaire, easily, with hard, without any hard work, just by putting some money away early.